Archive for car insurance

Is Car Insurance Telematics Black Box Technology Penalising Good Drivers?

Car Insurance telematics, often known as in-car black box technology, has been hailed this year as the panacea for all the ills of insuring young drivers and claims to offer this class of driver cheaper car insurance.

The technology works by having a ‘black box’ fitted under the bonnet of the insured vehicle which measures the drivers performance and sends data using a variety of techniques, to the insurer for analysis and pricing.

Premiums are initially charged using known risk data and rating factors and then adjusted up or down over the course of the policy life. Many large car insurers have adopted the technology in a bid to win a larger share of this lucrative yet risky end of the market and in many cases premiums for young drivers have been reduced.

However questions are now starting to be asked about the accuracy of the data and the consequent pricing models.

The typical system works by measuring location defined by GPS, the time of day and certain performance related measurements for acceleration, speed, cornering and braking. A scoring method is applied to each of these criteria to determine the drivers performance and additional premium or future discounts are applied dependent upon these scores.

Clients can then access their account either online or via a mobile phone app where they can see how well the insurance company thinks they drive and discover whether they will get a refund or be charged more. The customer application often known as a dashboard shows the drivers perceived peformance in a colour coded Green – Amber – Red layout with performance rated from 1 bad to 5 Angelic.

However many drivers are now complaining about the fairness of the system and the measurement and charging methods and this week the BBC Radio 4 consumer complaints program ‘You and Yours’ reported on the growing number of dissatisfied drivers.

One particular interviewee a Mrs Bev Stainsby took out Co-operative car insurance at a cost of £1100 to cover herself and her young son using the telematics system. The car was driven for a short period of time by the youngster before he went away to university. Since then the car has been driven exclusively by Mrs Stainsby who when she took over usage noticed that the dashboard scores were declining and further charges might have to be paid. She only uses the car to commute 20 miles per day on a straight road and was horrified to notice that the system was penalising her driving particularly for cornering and braking. She doesn’t trust the calibration of the telematics and upon enquiry was fobbed off by the insurer with the excuse that the scores are averaged over the year. A spokesperson for the company admitted that insurers adjust the basic system scoring against known data collected from its other drivers using the boxes, but defended the performance calibration. Mrs Stainsby is not happy! The program is available to listen to on BBC iplayer for a short period of time.

Steve Davis of online specialist car insurer said “Although the telematics driven policies can have benefits to both the driver and the insurer, the systems are still in their very early stages of development and there are some large concerns that customers should be made aware of. In particular the question of privacy.”

“The system allows insurance companies to completely profile your lifestyle, way beyond your driving skills. It allows them to see exactly where you go, who you visit, when you go out and also classifies you as a certain type of driver which may adversely affect you in the future.  Clearly there are problems with insurers adjusting the calibration scores and until a defined set of  performance skill scoring is adopted across the industry, many drivers will be financially disadvantaged by belonging to the ‘wrong’ pool of drivers defined by a particular company’s dataset.”

“Furthermore, where multiple drivers have access to the same vehicle, the data cannot be trusted as a definition of risk and pricing anomalies are bound to occur”

RBS Sells Off Direct Line Insurance Cheaply!

City Analysts are stating that the flotation of  government owned Direct Line is priced well, as the share price is up 7% today on the grey markets from the initial offering of £175 per share. The official floatation is not until the 16th of October.

However this begs the question that the company is being sold cheap and the taxpayer losing again.

The UK government has pumped more than 21 billion pounds into RBS, and the insurance side is one of the most profitable areas.
The Stock market listing of the company, which also owns the Churchill and Green Flag brands,  is the largest in London this year.
Private investors have been less sceptical about the float than other institutions.

At 175p a share, Direct Line would have had a market value of £2.63bn, which is much is lower than a £2.8bn-£3.5bn value placed on the insurer by the IPO advisor. Clearly the private investors see a quick profit to be made.

The future of the Croydon based company, which invented call centres, might appear rosy to those looking to make a quick buck, however the UK car insurance market is already saturated and the competition enquiry into car insurance might crimp future profits, however the brand under new management has been seen to perform well over the last two years.

Does your BMW Car Insurance actually cover you for theft?

If you own a recent BMW car you may be surpised to find that it’s not actually covered should you fall victim to theft and try to make a claim.

The problem stems from the on-board computer and the associated key-fob technology which allows car thieves easy access to your vehicle.

Technology has been widely available and can be obtained on the Internet, that allows would be thieves to tap into diagnostic system of the on-board computer and clone the key technology, allowing easy access to the car.

The problem has been exacerbated by recent EU competition directives that allow non BMW garages the ability to access diagnostic systems.

West Midlands police have reported 154 thefts of BMWs with this technology in the last three months.

The Government sponsored company responsible for setting the insurance security rates Thatcham Research for members of the ABI reported the problem to insurance companies  over nine months ago. They have refused to downgrade the 5 star security rating of the affected models as they state this would be unfair to the manufacturer.

The BBC has been leading an awareness campaign for owners of these BMWs with its consumer affairs program Watchdog and Radio 4.

Speaking on Radio 4 a Mr Gordon who is a director of Southampton Football Club said he was treated like a criminal by his car insurance company LV after he made a claim for theft. Despite having both keys in his possession and a CCTV tape he managed to secure from close by to where the car was stolen from he claimed that LV  inferred that he was party to the theft. They sent out a private investigator to interview him and  treated him as a suspect. It took them 9 months to finally settle claim, only paid out the minimum amount which was a lot less than the cars value and he lost his no claims discount.

When contacted BMW suggested that any concerned owner should contact their  dealership and fit secondary security devices such as steering wheel crook locks.

Over Fifties, Demographics and Car Insurance

The changing UK population demographic structure with a top heavy and aging baby boomer shape is causing serious problems for all financial services providers, not just those pension companies whose funds are shrinking as fast as the death rate.

uk population and insurance

Insurance companies have also had to consider both the changing shape of the markets and the changing nature of the risks as the population ages.

Insurance itself is partly to blame for the predicament it now finds itself in regarding the new nature of risks, of which fifty percent of the insurance buying UK public are now over the age of 50.

Health and safety demands of commercial insurance policies and wider cover and availability of health insurance have both for example added to the longevity of the buying market.

The recent global economic  turmoils have also accentuated a new approach to over fifties insurance. Consider the fact that the average age of a first time buyer in the UK is today 38!  The bulk of the home insurance buying market is therefore substantially over fifty.

Unfortunately this age group is also one that is suffering the most under the current economic crises and form the bulk of the ‘squeezed middle’ that we keep hearing about. These over fifties are the first to be made redundant and are least likely to find a like for like replacement job, whilst those over retirement age have seen their capital assets value decrease with lower house prices and low interest rates.

Whatever financial predicament the over fifties age group find themselves in, they are still an attractive proposition to most insurance companies simply due to the nature of the risks presented and the avoidance of adverse selection. In insurance company actuary eyes, old people generally present a good risk. Older people are more likely to have more possessions and a whole specialist home insurance market has sprung up to service the wealthier end of the market.

This is also clearly demonstrated in the UK car insurance market where a complete specialist niche has been created by both car insurance companies and car insurance brokers for over fifties and senior driver car insurance.

For those of us having a mid life crisis at the age of fifty you can rest assured that the cost of the cover for that sports car you just bought will be lot a cheaper than a year ago,  if you shop around and visit a niche senior car insurance provider.

Young Mans Blues

So why is car insurance so much cheaper once you cross the rubicon age of 50?  The answer can be put down to one word, the same one that is missing and costs an young or new driver so much more in premiums – experience.

Older drivers are more likely to drive newer safer cars. Their driving experience means that they are also less likely to claim which is borne out by the statistics and most older drivers will have built up a substantial no claims bonus history which in many cases will be protected. They are more likely to live in a much safe postcode rating area for theft and damage than younger people and are more likely to keep their cars garaged or on a drive away from the road. Knowing the risk of claims is smaller the greater the size of the pool, the car insurers are all offering further discounts to older people in an attempt to persuade them to switch.

Because older drivers have a less likely propensity to claim on their car insurance policies, this means that claim free senior drivers are in effect subsidising the more reckless young! Think about this the next time you blast past the old g*t in the Skoda!

UK Government Declares War On Private Motor Insurance

By A Consumer – War Correspondent  – Car Insurance War Front Line

The UK Government has declared war on the private motor insurance market.

The Government has yet to decide who the enemy actually is, although one ethnic group ‘CFA referal collectors’ have been singled out for the death camps and news coming out of Westminster today confirms this.

The call for the ‘War on Car Insurance’ from the media and consumer led groups has reached deafening proportions recently and the UK Government will tell you they have been forced to act.

The AA have stated that the ‘average’ car insurance premium has risen by 40% and on the word of the AA and probably as a deflection away from the more pressing economic issues, battle has begun.

Government Forces Attack

First into battle yesterday for the Government, was the consumer watchdog the OFT (Office of Fair Trading). They have been asked by HQ to find out if the price rises are real and whether there are any (choke) anti competitive practices occurring in the UK private motor insurance market that may be pushing up prices.

To do this they have initially asked those thought to be contributing to the high costs of car insurance and will then ask the nation to contribute in an open call to arms, to publicly air their grievances on car insurance price hikes, by filling in a form.

The OFT has asked all the suspects to contribute to the war effort or else stand accused of being part of the problem not the solution to higher car insurance premiums.

Most Wanted Suspects

1.  Price Comparison  Websites

2. Replacement Vehicle and Car Hire Companies

3. Approved Motor Vehicle Repairers.

4. Insurance Companies Products.

None of the major suspects is being pulled in for interrogation at this point in time. They have been given 5 weeks until October 12 to comply with the resolution or face shock and awe.

A spokesperson for the regime said’

“We will be engaging with participants in this market, trade bodies, the Government, regulatory agencies and consumer groups over the next five weeks by issuing information requests, arranging roundtable discussions and holding bilateral meetings.

Information requests:

We will also be inviting comments from consumers and other interested parties. The OFT is, however, unable as part of this study to address or advise consumers in this market on individual matters or complaints.

Any party that wishes to submit their written views, can e-mail by 12 October 2011 or write to:

Private Motor Insurance Call For Evidence
Fourth Floor
Office of Fair Trading
Fleetbank House
2-6 Salisbury Square
London EC4Y 8JX “.

Second Front Opens with Pincer Movement

As soon as the OFT went into battle yesterday, it was immediately announced that the Government were opening up another front with a full out attack of its heavily armed praetorian guard, the FSA, against those supplying information to the enemy in return for money.

The practice is to be banned immediately it has been confirmed today, indicating that the government will take the side of Insurers against Lawyers. Questions of the legality of the war and the interfering with free trade could be raised at the international courts at a later date.

Tensions between Solicitors and Insurance Companies have been rising steadily over the last few years with Insurers furious about having to pick up massive bills for professional negligence by solicitors involved in mortgage and building surveying disputes. In many cases Solicitors PI premiums have been raised so high that many solicitors are now finding it impossible to practice.

Coupled with the massive amounts that the insurance companies are having to pay against public liability and employers liability claims for negligence, it appears the Insurance companies have finally had enough.

The number of car accidents involving personal injury claims is 31% down on the average for ten years prior, however the cost of personal injury claims has more than doubled from £7bn to £14bn in the past ten years and motor insurance premiums have risen at least 30% this year.

Insurance companies are blaming Conditional Fee Arrangements (CFA’s) or ‘No Win No Fee’ for the rising costs of car insurance. They argue that there is no disincentive, such as having to pay if you lose, that’s stops people making a claim if you have been injured in a car insurance accident.

The Government has stopped going as far as banning CFA’s completely, which would seriously impede that right to justice for the majority of the people in this country who cannot afford solicitors bills of £180 per hour +.

Today it has announced that those referring accident injury victims to solicitors and lawyers will be banned from receiving payment!

It also seems that the special relationship that UK Insurance companies have with UK Government through the ABI etc. appears stronger than that of the Law Society and Solicitors Regulation Authority (SRA) who traditionally only find allies in the other place, the House of Lords.

It also appears that the Government think that the Insurance Companies, who set the car insurance prices, are not actually responsible for their own pricing!

Insurance Blog will keep you abreast of all the developments as the war on car insurance unfolds. We will also be running a series of posts that examine in detail the questions being asked of the Motor Insurance Market.